Punj Lloyd lenders conduct viability study for loan recast

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The lenders are also said to be valuating a forensic audit of the company.

A consortium of banks, led by State Bank of IndiaBSE 0.03 %, is considering debt restructuring options for Punj LloydBSE -0.50 %following its failure to meet scheduled loan repayments for eight successive quarters and mounting losses at the company.

The lenders, to whom the company owes Rs 14,000 crore, are also said to be valuating a forensic audit of the company, though no final decision has been taken yet.

The SBI-led consortium recently appointed consultant Feedback Infra to conduct a techno-economic viability study of the company, a prerequisite for any restructuring exercise, people directly familiar with the matter said. “It is the policy of the bank not to comment upon individual accounts and its treatment,” said an SBIBSE 0.03 % spokesperson.

A spokesperson for Punj Lloyd said in an emailed response to ET’s queries, “Our lenders have been supportive of financial restructuring to pro side Punj Lloyd with the breathing pace to scale up operations and generate necessary cash to revive business profits. Detailed consultations with the lenders are underway and a workable solution is expected fairly soon.”

POSSIBLE OPTIONS

The creditors are said to be discussing various options including a potential takeover of the company if it is unable to bring in fresh equity to correct its capital structure.

Other options could include restructuring under the Reserve Bank of India’s S4A scheme which allows banks to convert a part of their loans into equity without any change of management control at the level of the borrower or the implementation of a 525 scheme which will provide the company extended timelines to repay loans.

DEMAND FOR FORENSIC AUDIT

Certain lenders are concerned over what they described as Rs irrelevant diversifications’ by the company into new business segments and are said to be pushing for a forensic audit of its accounts. An executive with a public sector bank indicated that a forensic audit was par for the course for any restructuring that doesn’t foresee any change of ownership and termed it as standard operating procedure’.

A joint lenders’ forum to manage the account was set up two years ago and consists of public and private lenders including LIC, ICICI BankBSE -0.84 % and Axis BankBSE -0.39 %. The account has been classified SMA-II ever since the JLF was constituted. The classification implies that scheduled loan repayments have been delayed by between 60-90 days.

Punj Lloyd, which executes construction contracts for oil and gas and power projects, has an order backlog of more than Rs 18,000 crore.

[“Source-economictimes”]